Latin America and the Caribbean

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The Economistfavors Nigeria’s Ngozi Okonjo-Iweala to take over at the World Bank. In takes just four paragraphs (one of them mildly brutal, one of them extremely so) to ram home the argument:

The World Bank is the world’s premier development institution. Its boss needs experience in government, in economics and in finance (it is a bank, after all). He or she should have a broad record in development, too. Ms Okonjo-Iweala has all these attributes, and Colombia’s José Antonio Ocampo has a couple. By contrast Jim Yong Kim, the American public-health professor whom Barack Obama wants to impose on the bank, has at most one.

Ms Okonjo-Iweala is in her second stint as Nigeria’s finance minister. She has not broken Nigeria’s culture of corruption—an Augean task—but she has sobered up its public finances and injected a measure of transparency. She led the Paris Club negotiations to reschedule her country’s debt and earned rave reviews as managing director of the World Bank in 2007-11. Hers is the CV of a formidable public economist.

Mr Ocampo was also finance minister, though his time in office, 1996-98, saw the budget deficit balloon. He ran the mildly statist UN Economic Commission for Latin America and the Caribbean. His is the CV of the international bureaucrat.

Mr Kim, the head of a university in New England, has done a lot of good things in his life, but the closest he has come to running a global body was as head of HIV/AIDS at the World Health Organisation—not a post requiring tough choices between, say, infrastructure, health and education. He pioneered trials of aid programmes before they became fashionable and set up an outfit called Partners in Health which does fine work in Haiti and Peru. But this is a charity, not a development bank. Had Mr Obama not nominated him, he would be on no one’s shortlist to lead the World Bank. (Indeed he is a far worse example of Western arrogance than Christine Lagarde, whom the Europeans shoehorned into the IMF job last year: the French finance minister plainly had the CV for the job.)

Corruption is generally vilified as an unmitigated evil. It disenfranchises the poor, weakens public services, reduces investment, and holds back whole societies. And yet, in some instances, corruption can actually be very useful, lubricating business in a way that promotes growth, creates jobs, helps smooth the introduction of needed reforms, and reduces poverty.

It’s hard to find a happy diplomat at the United Nations Security Council these days. Western officials grumble about the difficulty of negotiating with India, Brazil and South Africa (the IBSA countries) over the Syrian crisis, to say nothing of China and Russia. The non-Western powers, they suspect, are all plotting to frustrate the U.S. and Europe.

Piffle, reply the supposed plotters. The bleak mood in the Council is a result of the West’s distortion of the UN mandate to protect civilians in Libya. If NATO hadn’t used that as a basis for regime change, there might be real cooperation over Syria. Even the unhappiest European officials accept that other powers’ anger over Libya is genuine.

Does anyone gain anything from the stalemate? Russia arguably does. Earlier in the year it failed to halt Western interventions in not only Libya but also Côte d’Ivoire. As Russia’s main claim to leverage at the UN is its willingness to act as a spoiler, these set-backs made it look a shadow of itself. On Syria, its blocking power returned as it resisted – and in October vetoed – EU and US efforts to pass a resolution sanctioning Syria.

For China, the benefits have been less clear, as it prefers to look pragmatic on the Security Council. Nonetheless it felt obliged to side with Russia over Syria. But the real losers have been the IBSA countries, which have often looked trapped between the West and the Russo-Chinese axis as they have tried to respond to events in the Middle East.

But at least IBSA has emerged as a semi-credible diplomatic force in UN affairs, right? I’m not so sure:

The fact that IBSA voted as a bloc can be interpreted as a success – it is generally recognised that the trio of powers have been significant swing voters in the Security Council this year. But this may only be a temporary phenomenon. Brazil is approaching the end of its two-year term on the Council, and South Africa continues to have a greater stake in acting as the leader of the African bloc than in aligning with India. IBSA’s brief moment of importance in the Council could soon be forgotten, and India’s leverage duly reduced.

Whatever else the Occupy protests (over 900 at the last count), have done, they have propelled the issue of inequality on to the front pages and into the political mainstream. The idea of the ‘99%’ is brilliantly simple, pulling together every group and every person who has a nagging sense that they are losing out in the global economic race while others pull ahead out of sight.

The case the protestors are putting basically an ethical one. A world where the majority of the benefits of growth go to the few while the costs of failure, whether in the form of bank bailouts, of redundancies, or of cuts to public services are borne by the many is not, it seems, one that an increasing number of people want to live in any more.

If that fails to convince, there are other more prosaic reasons to care about inequality too. Inequality, at least at high levels, does matter to growth, to poverty, and to stability. Here are five good reasons, drawing from recent economic research, for politicians to care about – and act on – inequality.

One, inequality contributed to the financial crisis. Debate rages about how much. But it does seem clear that when real wages for the middle and working classes aren’t rising, as they weren’t in America for much of the 1980s and 1990s, and when aspirations are rising rapidly, partly because of the impact of the lifestyles of the super-rich whose incomes are heading North at a rapid rate, and when credit is cheap (thanks to the mega-profits being made in China due partly to low wages and growing inequality there), then an unsustainable credit bubble is only the click of a Wall Street button away.

It now looks like the Security Council will vote on a (still too weak) resolution demanding the end of the Syrian crackdown today or tomorrow. Russia is still bad-mouthing the proposal, drafted by the Council’s European members, but other powers are lining up to back it. Brazil – previously numbered among opponents of a resolution along with China, India and South Africa – looks like it’s on board:

In a joint statement issued the same day European nations were to seek a vote on a UN Security Council resolution condemning Syria’s crackdown on protests, EU leaders and visiting Brazilian President Dilma Roussef said the two sides “expressed grave concern” at the current situation in Syria.

“They agreed on the need to continue urging the Syrian authorities to put an end to the violence and to initiate a peaceful transition to democracy.”

Turkish Prime Minister Recep Tayyip Erdogan voiced support for the proposed UN resolution and said he would soon announce sanctions on the neighbouring country.

“The draft resolution before the council today is in the nature of sending a warning. We hope there will a positive outcome of this vote and that there will then be further discussions about whatever further steps need to be taken,” Erdogan told a news conference during a visit to South Africa.

The political picture could change again before the vote, and it can’t be repeated too often that the EU’s resolution has been watered down a lot , with a threat of sanctions reduced to near-invisibility. But I think that this episode underlines the point Franziska Brantner and I made in our recent update on human rights and the UN for ECFR: many non-Western powers, especially rising powers like Brazil, want to distance themselves from Russia’s obstructionism in UN debates. Even China is ready to step away from the Russians, as it did over Côte d’Ivoire. As we noted in our paper, and I repeated here last week, this opens up the EU’s options for coalition-building in New York. It looks like the EU is finally finding ways to use those options…

Moss and Leo estimate that more than half of the 68 countries currently eligible for concessional World Bank lending (under the IDA -the International Development Association) will ‘graduate’ by 2025.

Most (80%) of the remaining countries eligible for concessional World Bank lending will be sub-Saharan African countries (25 of 31). The only non-African countries will be Afghanistan, Bangladesh, Myanmar, Nepal, Haiti, and Timor-Leste. Countries currently defined as fragile will account for sixty percent (18 of 31 countries) of the countries.

In a recent post one of the authors, Todd Moss suggests that aid agencies as currently orientated are not ready for the world of non-aid tools and global public goods that flow from the decline in poor countries, new donors and weak public support for large increases in aid budgets (UK aside maybe).

I couldn’t agree more – and as they note the implications for the aid system are enormous.

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Global Dashboard explores global risks and international affairs, bringing together authors who work on foreign policy in think tanks, government, academia, and the media. It was set up in 2007 and is edited from the UK by Alex Evans and David Steven. Read more here